Page 33 - Insurance Times July 2024

or releases the accelerator pedal. While this may not cause ushered in, the change that EVs are bringing in is incremental.
problems at lower speeds, RBS may not provide the required Except for the energy source, the technology that drives the
deceleration in high-speed or emergency situations. In such vehicles, and the ecosystem network, most components in EVs
circumstances, drivers will need to apply brakes with closely resemble or are derived from traditional ICEVs. The
significant force or use conventional friction brakes. current generation of EVs has upended all the earlier versions
due to their relatively superior performance. The EVs are still
It is important for drivers to be aware of this and adapt their in their nascent stages and are continuing to see efficiency
driving behavior accordingly. Besides, RBS may be less improvements. The evolution of the insurance industry and
effective in adverse weather conditions such as ice, heavy its response to the growth of EVs can be visualized in three
rain, or snow. The intensity of the regenerative braking stages: rooted to ICEVs, finding their own turf, and taking flight
varies based on the type of EV and the road conditions. Due (see Figure 2). While these aren't fixed divisions, markets may
to this, new EV drivers may find it challenging to gain vary in their maturity for different attributes based on the
confidence in the effectiveness of braking. RBS may generate extent of EV adoption and advancement.
a significant amount of electrical energy, which, if not
managed properly, can lead to battery overheating. An Rooted to ICEV
efficient working thermal management system is essential The introduction and early adoption of EVs, which we are
to maintaining the temperature within safe limits.
currently observing in several markets, mark the initial
Insurer's Toolbox stage. The components of an EV go through a lot of changes.
The current generation of EVs has been around for two
Personal transportation underwent a radical transformation
decades, and market adoption improved only after
in the late 19th century when it moved from the horse-
governments incentivized buyers. The insurance industry
driven carriage era to motorized vehicles. For over a does not have adequate data related to the various types
century, ICEVs have had a tremendous growth trajectory in of risks emanating from EVs and their driving conditions.
variety, capacity, and number sold. Every component in Almost all the risks mentioned in the earlier section relate
ICEVs got reinvented, remodeled, and refined to make
to the first stage. This lack of accurate understanding is a
personal mobility faster, safer, and more efficient.
shortcoming for profiling safety, modeling risk, and pricing.
Hence, insurers base the risk on EVs as an incremental
The auto insurance industry that provided coverage to the
variant of ICEV. Selected risk coverage is included as an add-
ICEVs simultaneously grew by appropriately responding to
the evolving risks of the automobile industry. As the industry on to conventional motor policies. As the purchase and repair
amassed risk data pertaining to the ICEV, such as vehicular costs of EVs are high and the risks are still less understood
and modeled, the insurance premium remains
data, driver profile and demographics, driving behavior, the
environment in which the vehicle is being driven, claims comparatively higher.
data, and their interconnections, insurers designed different
types of risk coverage that were actuarially modeled and An important attribute of ICEVs is that they are disentangled
accurately priced. from OEMs because of their mechanical nature. Once the
ICEVs are on the roads, they are mostly detached from
The processes for assessing and underwriting the OEMs as an ecosystem of reliable third-party component
homogenous or individual risks, arriving at the risk premium, manufacturers and repair service providers exists. However,
post-accident services, inspection of the damage, EVs are driven and powered by sensors, software, and data.
settlement of claims, and the terms and conditions of Due to this, they remain closely entangled with OEMs. EVs
renewing a contract were defined. The ecosystem that require higher expertise for servicing, and the market is
comprises gas stations, licensing, repair service networks, presently controlled by the OEMs. As a result, insurers
and third-party data providers to support driver's license heavily rely on OEMs for evaluating risks and handling claims.
status, traffic violations, and accident history has The risks associated with various models of EVs, and their
progressively evolved. Most importantly, the laws governing components vary. Due to this, insurers homogenously group
road transport and insurance were formulated, stipulating EVs broadly based on their type, which acts as a proxy, to
the pre-requisites for drivers and mandatory or non- assign them to specific risk groups.
mandatory insurance coverage.
Unique risks can only be identified when adequate risk data
When compared to the radical transformation that ICEVs is gathered. The control over information about the vehicle

30 July 2024 The Insurance Times